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Unity Software (U) to Post Q2 Earnings: What's in the Cards?

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Unity Software U is set to release second-quarter 2021 results on Aug 10.

For the quarter under review, the company projects revenues between $240 million and $245 million, and revenue growth in the range of 30-33% year over year. The Zacks Consensus Estimate for revenues is currently pegged at $244.4 million.

Moreover, the consensus mark for the bottom line is pegged at a loss of 12 cents per share, unchanged over the past 30 days.

Let’s see how things have shaped up prior to the announcement.

Unity Software Inc. Price and EPS Surprise

Unity Software Inc. Price and EPS Surprise
Unity Software Inc. Price and EPS Surprise

Unity Software Inc. price-eps-surprise | Unity Software Inc. Quote

Factors to Consider

Unity Software’s second-quarter top line is expected to have benefited from robust demand for its software solutions from content creators like game developers, architects, automotive designers and filmmakers. Growing momentum in the Operate Solutions business is likely to have served as a key catalyst.

The first quarter of 2021 saw new customers in household appliances, automotive, healthcare, aerospace, and government as well as a multinational retailer. This trend is expected to have continued in the to-be-reported quarter.

In addition, spike in consumer spend in the online gaming industry is expected to have driven the adoption of Unity’s real-time 3D technology among gaming companies in the to-be-reported quarter.

In March 2021, the makers of the game Candy Crush, Activision Blizzard ATVI owned Kings franchise, released the latest Crash Bandicoot on the Run, built entirely on Unity. They chose Unity to bring a beloved franchise to mobile with console-quality graphics and playable on a broad array of devices.

Further, the company’s partnership with Snap SNAP to extend the reach of Unity’s Ad supply to Snapchat advertisers is expected to have been a key catalyst. It also brings Snap technology to mobile game developers through select Snap Kit tools and gives Unity developers access to Snapchat’s 249 million daily active users.

The above-discussed partnership is anticipated to have expanded the reach of Unity’s platform to a wide mobile gaming audience base, thereby stoking top-line growth during the quarter to be reported.

Unity has been expanding its platform by introducing product capabilities, which are likely to have been a major growth driver.

During the second quarter, Unity Software announced the availability of Unity Computer Vision Datasets aimed to reduce the cost of developing computer vision applications, and more quickly train AI for the Manufacturing, Retail, and Security industries.

Steady demand for interactive, real-time 2D and 3D content for mobile phones, tablets, PCs and virtual reality devices is likely to have aided the company’s top line.

The company’s collaborative agreement with HERE Technologies, the leading location data and technology platform, to partner on developing next-generation embedded automotive HMIs with state-of-the-art, RT3D rendering capabilities is expected to have been a game changer.

Notably, 837 customers generated more than $100,000 of revenues in the trailing 12 months as of Mar 31, 2021, up from 668 customers in the year-ago period.

Furthermore, the company’s dollar-based net expansion rate, which measures expansion in existing customers’ revenues over a trailing 12-month period, as of Mar 31, 2021 was 140% compared with 133% in the year-ago period.

The momentum is likely to have continued in the soon-to-be-reported quarter, primarily on strong adoption of the company’s subscription-based Create Solutions and Operate Solutions.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Unity Software has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Stock That Warrants a Look

Here is a company, which, per our model, has the right combination of elements to post earnings beat in its upcoming release.

Agilent Technologies, Inc. A has an Earnings ESP of +1.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.


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